PBOC raises FX reserve requirement ratio from 5% to 7%

The yuan falls on the announcement

The change will go into effect starting from 15 June.

The yuan has had a bit of a volatile trading day so far with earlier remarks by an ex-PBOC official suggesting that local authorities may intervene – prompting a drop in the currency – before the PBOC itself fixed the yuan at its strongest since May 2017.

In the bigger picture, I don’t see this reversing the trend in the stronger yuan as long as officials are going to maintain the narrative that a stronger currency reflects more solid economic fundamentals.

But such a move as that above will at least pump the brakes to prevent things from going too far, too fast – which has never been to China’s liking.

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